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Financials

Soilbuild Business Space REIT Unaudited Financial Statements And Distribution Announcement For The Second Quarter And Half Year Ended 30 June 2018

Financials Archive

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Statement of Total Return and Distribution Statement

Balance Sheet

Footnotes:

  1. Non-tax deductible items comprise mainly the Manager's management fees payable in Units, rent-free adjustments, the Trustee's fees and amortisation of debt arrangement, structuring and prepayment fees and is partially offset by non-taxable gain on divestment of a property held for sale.


  2. nm denotes not meaningful.

Balance Sheet

Balance Sheet

Review of the Performance on 1H FY2018 compared to 1H FY2017

Gross revenue was S$38.2 million in 1H FY2018, S$5.4 million or 12.3% lower than the gross revenue in 1H FY2017. The decrease in revenue was largely attributed to lower contribution from 72 Loyang Way, KTL Offshore and West Park BizCentral amounting to S$2.7 million, S$1.2 million and S$1.2 million respectively.

Property operating expenses were S$4.9 million in 1H FY2018, S$0.6 million lower than 1H FY2017 mainly due to lower property tax expenses incurred for Eightrium.

Net property income was 12.4% lower at S$33.2 million in 1H FY2018 from S$37.9 million in 1H FY2017 mainly due to the abovementioned reasons.

The increase in interest income of S$0.2 million was largely due to the placement of the property divestment proceeds in a fixed deposit account. Gain on divestment of a property held for sale relates to the divestment of KTL Offshore on 28 February 2018.

The decrease in finance expenses amounting to S$0.4 million was mainly attributed to S$55 million lower gross borrowings following the redemption of notes due in May 2018, lower post-refinancing bank loan margins and was partially offset by higher floating base rates.

The decrease in Manager's management fees of S$0.4 million was due to lower distributable income which resulted in lower base fee.

Other trust expenses comprised largely professional fees and on-going listing expenses. The reduction in other trust expenses of S$0.2 million was due to the absence of credit rating fee in FY2018 after Soilbuild REIT's withdrawal of the credit rating, as well as lower professional fees.

Total return before distribution was S$1.8 million lower due to S$4.7 million lower net property income and was partially offset by the gain on divestment of KTL Offshore amounting to S$1.7 million, lower Manager's management fee, finance expenses and other trust expenses.

Non-tax deductible items were S$1.8 million lower as the gain on divestment of KTL Offshore was non-taxable.

Income available for distribution was S$27.3 million in 1H FY2018, 11.7% lower than 1H FY2017 largely due to lower net property income.

Review of the Performance on 2Q FY2018 compared to 2Q FY2017

Gross revenue was S$18.7 million in 2Q FY2018, S$2.8 million or 13.1% lower than the gross revenue in 2Q FY2017. The decrease in revenue was largely attributed to lower contribution from 72 Loyang Way and West Park BizCentral amounting to S$1.0 million and S$0.7 million respectively and absence of income following the divestment of KTL Offshore in February 2018.

Property operating expenses were S$2.5 million in 2Q FY2018, S$0.3 million lower than 2Q FY2017 mainly due to lower property tax expenses incurred for Eightrium.

Net property income was 13.2% lower at S$16.2 million in 2Q FY2018 from S$18.7 million in 2Q FY2017 mainly due to the abovementioned reasons.

The increase in interest income of S$0.1 million was largely due to the placement of the property divestment proceeds in a fixed deposit account.

The decrease in finance expenses of S$0.2 million was mainly attributed to S$55 million lower gross borrowings following the redemption of notes due in May 2018.

The decrease in Manager's management fees of S$0.2 million was due to lower distributable income which resulted in lower base fee.

Other trust expenses comprised largely professional fees and on-going listing expenses. The reduction in other trust expenses was largely attributed to lower professional fees.

Total return before distribution was S$1.9 million lower due to lower net property income and was partially offset by lower finance expenses and Manager's management fee.

Non-tax deductible items were S$0.1 million lower mainly due to lower Manager's management fee in units and was partially offset by lower non-taxable rent-free income.

Income available for distribution was S$13.4 million in 2Q FY2018, 13.1% lower than 2Q FY2017 largely due to lower net property income.

Commentary

Based on advance estimates, the Singapore economy grew by 3.8% on a year-on-year ("y-o-y") basis in the second quarter of 2018, moderating from the 4.3% growth in the previous quarter. On a quarter-on-quarter ("q-o-q") seasonally-adjusted annualised basis, the economy expanded at a slower pace of 1.0% compared to the 1.5% growth in the preceding quarter.

The manufacturing sector grew by 8.6% y-o-y in the second quarter of 2018, slower than the 9.7% growth in the previous quarter. All clusters within the sector expanded during the quarter, with the electronics and biomedical manufacturing clusters contributing the most to the sector's growth. On a q-o-q seasonally-adjusted annualised basis, the sector shrank marginally by 0.1%, a reversal from the 21.3% growth in the preceding quarter.1

Singapore's manufacturing activity continued to expand in June 2018 but at a slower pace, with the Purchasing Managers' Index ("PMI") falling to 52.5. PMI for the electronics sector posted a reading of 51.9.2

Rentals of all industrial properties fell by 2.0% and 0.1% in 1Q 2018 y-o-y and quarter-on-quarter respectively. The multi-user factories, single-user factories and warehouse rental indices have receded 1.8%, 2.4% and 5.5% y-o-y respectively, whilst business park rentals expanded 6.9% y-oy. In 1Q 2018, vacancy rate for all industrial space fell by 0.1 percentage points q-o-q largely due to a 0.2 percentage point reduction in single-user factory vacancy and was partially offset by an increase in vacancy rates of business park and warehouse space by 1.5 and 0.2 percentage points respectively.3

  1. Source: Ministry of Trade and Industry’s press release dated 13 July 2018.
  2. Source: Singapore Institute of Purchasing & Materials Management publication.
  3. Source: JTC quarterly rental index of industrial space.